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Russia: Government Introduces Bill to Regulate Greenhouse Gas Emissions and Absorption

(May 7, 2019) In December 2018, the Russian Federation’s Ministry of Economic Development drafted a bill on state regulation of emissions and absorption of greenhouse gases. (Federal’nii Zakon o Gosudarstvennom Regulirovanii Vibrosov i Pogloshenii Parnikovikh Gazov i o Vnesenii Izmenenii v Otdel’nie Zakonodatel’nie Acti Rossiiskoi Federatsii. Proekt [Federal Law on State Regulation of Emissions and Absorption of Greenhouse Gases and on Amending Select Legislative Acts of the Russian Federation. Draft], Dec. 4, 2018, Federal Portal of Draft Regulations website.

The goal of the bill is to create conditions for reducing greenhouse gas emissions while providing for the sustainable economic development of the Russian Federation in accordance with the country’s international obligations. (Id. art. 1.) The state would regulate emissions of greenhouse gases by establishing targets for reduced direct emissions and/or increased absorption of greenhouse gases for the Russian Federation in general and across various sectors of the economy in particular. The government is proposing a permit system for direct emissions of greenhouse gases; economic mechanisms to regulate emissions and absorption, including mechanisms of transfer and trading of units of emissions and absorption; and taxation privileges. (Id. arts. 3, 4(4), 13.)

Authorities of Government Bodies

Regulation of emissions and absorption of greenhouse gases would be divided among the ministries of the federal government, federal executive agencies, and agencies of the Russian Federation’s constituent components. (Id. arts. 4, 5, 6.)

According to the bill, the government of the Russian Federation would establish a list of greenhouse gases subject to regulation, along with targeted indicators for direct emissions for a defined period. It would also create a procedure for permit issuance, formulate the reporting mechanism and its format, and set the payment amount and accounting rules. (Id. art. 4.)

The bill also proposes that federal executive agencies issue time-sensitive permits for direct emissions, approve methodology for qualitative assessment of direct emissions, and accredit entities involved in verifying emissions and absorption reports. (Id. art. 6.)

The constituent components of the Russian Federation would also draft and adopt enabling legislation, regulations, and climate adaptation measures at the regional and local level. (Id.)

Accounting for Emissions and Absorption

The bill calls for the adoption of a nationwide system of accounting for greenhouse emissions and absorption. The system would include a registry of projects implemented in the area of emissions reductions and absorption increases, direct emissions permits, and units of emission control. The greenhouse emissions accounting system would be charged with monitoring direct emissions and providing long-term projections for anticipated emissions. (Id. art 7.)

Rights and Obligations of Regulated Entities

Regulated entities would conduct an inventory of direct emissions and pay fees for emissions in excess of established limits if the emissions were not offset by increased absorption. (Id. art. 8.) These entities would also initiate and implement projects aimed at reducing emissions and increasing absorption of greenhouse gases, and transferring or trading emissions and absorption units. (Id. art. 9.)

Economic Measures

Economic regulation measures provided in the bill include accelerated depreciation of fixed assets, a favorable tax regime, offsetting costs for implementing projects by regulated entities, and trading and transferring emissions units. (Id. arts. 11, 13.) These transactions would be exempt from value-added tax but subject to financial and accounting reporting. (Id. art. 13.) Should emission amounts exceed the limits specified in the permit, the regulated entity would pay a fee calculated per ton (approximately 2,204.6 pounds) of CO2-equivalent over the mass of permissible emissions. (Id. art. 14.)

Mass Information Actions

The bill provides for a mass-media campaign to inform the public about climate change and its impact. (Id. art. 17.)

Reactions to the Bill

The bill has received a mixed reception. Environmental nongovernmental organizations, such as the World Wild Fund for Nature and Greenpeace, have expressed their approval for state regulation of greenhouse emissions. (RSPP Poluchil Klimaticheskuju Ustanovku, Belij Dom Godovit Promishlennikam Ekonomicheskie Meri Dlja Snizheniya Vibrosov [RSPP Receives Climate Setting, White House Readying for Industrialists’ Economic Measures for Reducing Emissions], KOMERSANT (Mar. 3, 2019.) However, representatives of the Russian Union of Industrialists and Entrepreneurs and the Ministry of Energy have opposed the bill, arguing that it would have a negative impact on the energy sector and industry. (Russia Floats First Law to Regulate CO2 Emissions, CLIMATE HOME NEWS (Mar. 22, 2019).) Speaking at the Congress of the Russian Union of Industrialists and Entrepreneurs on March 14, 2019, President Putin urged its members to overcome their opposition to stricter environmental regulatory measures because such measures are necessary steps in modernizing the Russian economy and promoting its sustainable development. (Vladimir Putin Vistupil na Plenarnom Sasedanii S”eszda Rossijskogo Soyuza Promishlennikov i Predprinimatelei [Vladimir Putin Speaks at Plenary Session of Congress of Russian Union of Industrialists and Entrepreneurs, KREMLIN (Mar. 14, 2019).